Forest City demanding $2 million from New Rochelle for failed Echo Bay project

Forest City Residential, a developer whose long-planned waterfront development project failed last November, wants New Rochelle to reimburse the company $2 million in expenses, The Journal News/lohud.com reports today.

Forest City, which said it spent a total of $3.2 million on the doomed project, is accusing New Rochelle of “willful misconduct” and asking the city to pay more than half its expenses. The company sent New Rochelle a letter Feb. 5 that demanded the city “immediately” pay the reimbursement, citing terms of a memorandum of understanding the two sides signed in 2008 and amended over the years.

New Rochelle isn’t buying it. A statement issued by City Hall Wednesday pointed out that Forest City invested in the project voluntarily and maintained that there is “no legal basis” for the developer’s claims.

The City Council prevented Forest City Residential’s development project from moving forward three months ago by refusing to approve a land disposition agreement. Its vote was 6-1 against the project. Only Mayor Noam Bramson, who had long championed the development, voted for it.

“While it is unfortunate that the parties were not able to reach full agreement on the Project, there is no question that the City diligently and in good faith performed all its obligations in accordance with the relevant agreements,” the city’s statement said. “In the event that Forest City determines to pursue its claims against the City, the City is prepared to take all necessary actions to defend itself.”

Echo Bay, as the project came to be known, began promisingly in 2006, when New Rochelle accepted Forest City’s proposal to develop a neglected stretch of city-owned land overlooking Long Island Sound. Early plans called for a hotel, 700 residential units and more than 100,000 square feet of retail space. The plans were scaled back dramatically after the recession hit.

Several New Rochelle officials declined to comment to The Journal News on the situation Thursday, citing the sensitive nature of what may turn into a costly legal fight.

Abe Naparstek, Forest City’s point person for the project, declined to comment.

(A rendering of the proposed Echo Bay development in New Rochelle./ Forest City Residential Group.)

Cara Matthews is a member of The Journal News' Tax Team. She has worked as an Albany correspondent and she covered Putnam County government and politics. Before that, she worked at newspapers in Connecticut and covered the state Legislature for one of them.